ODM Celestica said it will wind down hardware manufacturing operations for Research In Motion (NASDAQ:RIMM), its largest customer, dealing another blow to RIM as the BlackBerry maker continues on its plan to turn itself around.
Celestica, a contract electronics maker based in Toronto, said that over the next three to six months it will wind down manufacturing operations for RIM. The company said that it will work with RIM through the transition. The move likely means that Celestica will not be making RIM's BlackBerry 10 devices, which are schedule to be released later this year.
In the first quarter, RIM accounted for 19 percent of Celestica's revenue, which was down 16 percent from a year ago amid declining sales of RIM's BlackBerry devices. RIM said in late March it would take a $197 million charge due to excess inventory and Celestica said in April that it was working with RIM as it assesses its supply chain strategy.
"As we outlined in our Q4 earnings call, we are making changes to our supply chain as part of wider efforts to improve the efficiency and cost effectiveness of RIM's operations to help meet our strategic objectives and to deliver long-term value to our stakeholders," a RIM spokesman said.
Celestica makes high-performing RIM products such as the Bold 9900 and Curve 8520 and also provides some after-market services from its operations in Mexico, Romania and Malaysia. RIM's other suppliers include Flextronics International and Jabil Circuit.
RIM said in late May that it expects to post an operating loss for its fiscal first quarter, which ended June 2, due to deteriorating sales and price cuts it made to devices, according to CEO Thorsten Heins. The beleaguered company also confirmed it hired JPMorgan Chase & Co. and RBC Capital Markets to advise it on strategic options. The company is banking on BlackBerry 10 to revive its sales and its long-term fortunes.
For more:
- see this release
- see this Reuters article
- see this Financial Post article
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Article updated June 18, at, 1 p.m. ET, with comment from RIM.